In the short run those are exactly the three choices that governments face. They can raise taxes, they can cut programs or they can run deficits, or some mix of the three.
The decline in federal government revenues at $60 billion is so substantial that there would really be no way for you to cut government programs to anywhere near balance the budget. To do so would be devastating. You'd have to totally eliminate EI, totally eliminate, say, the Department of National Defence, and totally eliminate the Canada child benefit program. That would have been sufficient to balance the books in 2020.
Clearly, deficit financing is the right decision at this point. The federal government interest rate on 5- to 10-year bonds is at, or near, historic lows. We haven't paid this little in interest rates on bonds going back to the 1950s. Under 2% is extremely low in terms of what we're paying to finance this debt. It's very different, actually, than the situation we faced in the 1990s, when interest rates were much higher.
Certainly there's a risk that interest rates could rise and could increase costs to the federal government, but interest rates don't just affect the federal government. Interest rate rises affect the household and corporate sectors in addition to the provincial sector, all of which pay higher interest rates and all of which are much more highly leveraged.
The federal government is sitting at 50% of GDP right now in terms of mixed debt. The corporate sector is 130% of GDP and the household sector is at 110% of GDP. Those sectors would be hit much harder. We'd be driven rapidly back into a recession if we were to see a big increase in interest rates, before the federal government suffered in any real degree.